Do Republicans agree on how low NC should cap its income tax? 'Hell no.'

Your state income tax rate is 5.49 percent, and a proposal revealed earlier this month would've made it difficult for state lawmakers to ever raise it.

But now, lawmakers are reconsidering.

Republican legislators in the state House on Wednesday advanced a revised measure that could limit the income tax to 7 percent, so long as voters approve a referendum this November to amend the North Carolina Constitution. The House finance committee approved the new proposal Wednesday afternoon, and the full House gave preliminary approval about an hour later.

The constitution currently caps the income tax rate at 10 percent. Republicans earlier this month sought a constitutional amendment referendum to lower it to 5 percent.

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The new proposal comes after some legislators suggested that a 5 percent cap could hurt the state's ability to generate revenue (and then spend it on government services) during tough economic times. Democrats reiterated those concerns on the House floor Wednesday.

Rep. Darren Jackson, a Wake County Democrat and the House minority leader, noted that Washington D.C. is running at a $1 trillion a year deficit.

"They could shift things down to the state to pay for it," Jackson said. "This takes one of our options (for dealing with it) off the table."

Rep. Graig Meyer, an Orange County Democrat, said capping the income tax could shift the tax burden onto lower-income residents. If the state cuts funding for services that counties use, counties will find other ways to pay for those services.

"When you limit the income tax, you push out the tax burden on to property taxes, sales taxes and user fees," Meyer said. "Those taxes tend to disproportionately impact working people and poor people. Whereas the income tax you can use to raise more money from wealthy people who have high salaries."

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Nelson Dollar, a Cary Republican and key Republican budget writer, acknowledged that he had concerns but said he supports the 7 percent cap.

The state's ability to collect 7 percent of income taxes and the $2 billion in its rainy day fund are "more than sufficient to satisfy the rating houses or any of the needs we may have in the future," Dollar said.

Republicans didn't offer specific explanations for why they rolled back their tax cap proposal — but the new version is already receiving opposition from some state senators.

Sen. Tommy Tucker, a Union County Republican, wants the 5.5 percent cap and said he won't support a 7 percent cap.

"We'll have to caucus to determine whether we even take it up," Tucker said.